The Google example demonstrates that no one can be good at everything, even if they do hire a lot of smart people and have billions in the bank. People, like companies, are good at doing some things, and are okay, or poor, at everything else. Not because they can’t do other things, but because they don't have the time, inclination or disposition.

This truth has led to specialization. Individuals specialize. Companies specialize. Countries specialize. In economics, this is the principle of comparative advantage and it is the basis of trade. We do the things we’re good at, and buy in the things we’re not so good at, or don’t want to do.

We Can’t Be Good At Everything

Like Google, we can’t be good at everything.

Many small businesses make the mistake of trying to do everything, mainly due to lack of resources. However, the opportunity cost of trying to do everything can mean they end up being not very good at doing any one thing. This approach can make them uncompetitive.

Just because we can do something doesn’t mean we should.

Like many web professionals, I can do some coding. Some web design. A bit of this. A bit of that. But I know there are people who are way better at those things that I am, so I let them do it. If I focus on what I’m good at, then I can make money doing that, and buy in the skills I need.

There are many benefits to specialization. For starters, it’s much easier to build a reputation or brand. Who is the go-to guy for Search Engine News? Many people would answer Danny Sullivan. Who is the go-to guy for search patents? That would be Bill.

Another advantage is that specialization leads to omptimized and more efficient processes, and therefore lower costs. The specialist can optimize and improve their approach to a niche activity in a way a generalist seldom can because their focus means they are more likely to see the details.

Most of us occupy very crowded marketplaces, which makes it difficult to stand out as a generalist. Brands, and reputations, can get confused and diluted if businesses spread themselves over multiple service areas. Virgin gets away with it - mainly because of the brand that is Richard Branson - but they are an exception, not the rule.

Not that this article is about the merits of specialization vs being a generalist. More a case of optimizing a business to focus on those areas that are most lucrative, and literally weeding out everything else.

Weeding Out Clients

A lot of companies, like a lot of people, live paycheck to paycheck. They don’t want to turn down any business, because the more clients, the better, right? The more opportunities, the better?

Not all clients are equal. Not all opportunities are a good fit. A client who costs a lot to service, who doesn’t pay their bills on time, who makes life difficult for you is probably not a client worth having. Sure, they might help keep us going to the next paycheck, but this is not an optimal way to run a sustainable business long term. Such clients present an opportunity cost i.e. we could be working with better clients, be making better money, and honing our service around mutual benefit.

For this reason, many companies make a habit of firing clients, or never take them on in the first place.

For example, last year, I received a letter from my accountant. She advised me they were reviewing their business and letting a lot of their clients go, although they were still happy to work with me, and asked that I have a chat with them if I had any concerns.

I did have a chat with them, mainly to confirm my suspicions.

They were deliberately getting rid of 50% of their clients. They had figured out who their top clients were i.e. the clients who took them the least time to service because their books were in order, and they eliminated the rest i.e. those clients whos books were a mess and were generally a pain to deal with. They downsized their business, reduced overhead and now tell me they are making more money than they previously were due to their optimized cost structure. They also appear to be playing a lot more golf!

They optimized their business, became more profitable, and have a lot more time because they made a point of figuring out the core of their business, and saying “no” to everything else.

Say No

Saying no can be very powerful. Prospective clients seem to respect this more, not less. There is something very appealing about a service that is exclusive and beyond reach. It signals a level of confidence that can be attractive.

Exclusive positioning is not just done for the sake of it. It’s a way to filter clients in order to find a good fit, which is especially important for small companies, as they have less resources available to carry bad risks. If we can figure out a client need that we know we can service well (specialization), with sufficient margins for us to be enthusiastic, and the client gets the value they were looking for, then everyone wins.

Let’s say running a PPC bid management service earns an internet marketing company the most money with the least effort. Let’s say they also do web design, but this is a lot more work (read: higher cost to service), and the margins are lower.

Would this company be better off saying “no” to new web design business? Quite possibly. They could dedicate more time to PPC, their PPC processes would get more refined through increased specialization, and they would likely be better placed to compete in the PPC space as their brand and attention becomes more focused. They could let go of the web designer, thus reducing overhead.

Granted, there are many factors to consider, but the question is this: are some areas of your business being serviced only because you can? Or does it make sense to focus on the areas where there is best fit? i.e. better margins, lower costs, most productive relationships - even if that means letting some clients, and even some staff, go?

Comments

Sounds like a blog post I would write! I call those prospects "timesucks." They have this self-centered sense of entitlement, like they deserve a discount for breathing! They have no understanding of streamlining their own businesses for cost, starting with the cost of communication through meeting and phone when emails would do. In my biz, email also functions as a paper trail (or contract extension). I'm also a strong believer in filtering all information that comes into me, whether social media, RSS feeds, etc. After all, to make money in this world, you HAVE to control your time, and time is money! Your post really lifted my mood! Thanks!

Saying No is very powerful, sometimes its best also to do some quick background checks before signing up a client, as it may work out to be that you end up doing more for peanuts. Yes its good to give more to your clients, but sometimes they can take advantage of your generosity and expect you to do everything for them at no cost. You have to draw the line somewhere.

...if a person isn't willing to spend the extra 5 or 10 minutes to fill out a form they probably were not going to be willing to invest $10,000's (or even $1,000's) with the provider either.

Another great option is a negative option in the form...meaning you set up parameters & let them select from options, and if there are some things that don't fit you can either ignore the lead or perhaps have a separate department that works on some of the lesser fitting leads.

Of course we're talking about services here. A service is not like a product in that every aspect of it can be measured. You want a bigger hamburger? We don't do bigger hamburgers. THIS is our hamburger, as advertised.

A service is much more intangible, and that can certainly lead to problems. "I assumed this was included in the service" is one example. Also, the degree to which the service is performed is often hard to quantify because different customers may have different requirements and certainly different personalities. Four star treatment for two star prices. I heard the other day : "Business is simple. People make business complicated." - very true.

In web design where I am involved in, I try to "productise" my service as much as I can so that I can define what I offer more explicitly. I've also turned away a lot of business on initial call or email because I know that we will not be a good "fit" (no blame, no fault, just what I'm prepared to offer). I know when I hire a service provider - for example a gardener the other day - I tend to ask: "is this a job you're happy to take on?".

I think in other services though, it can be harder to evaluate. Your accountant probably uncovers a lot of skeletons in the cupboards of his clients only after they sign-up (they're not going to admit to those initially) and he realises he/she's taken on a messy client that looked straight-forward initially.

Also try telling a new start-up that they should say "no" to new business more often - not going to happen. When I started my own company, I was glad of ANY business coming my way. I think the "no" word creeps in more and more though as demands for our time become too great - then it's time to optimise and define more explicitly what we offer.

This is a really realistic contrast to the aggressive SEO posts that make you feel like a failure if you aren't an expert at 10+ SEO related skills. It's ideal to have a working knowledge on coding and social media, for example, but I think we limit our opportunities to flourish and innovate when we spread ourselves so thin. I'm really interested to see if the demand for specialists challenges agencies.

Also, haven't Google pretty much proven that they're no good at social media? Or at least they aren't stellar at it?

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